How Much Student Loan Debt Is Too Much? Unveiling the Answers & Strategies

Carrying Student Loan Debt

How Much Student Loan Debt Is Too Much? Unveiling the Answers & Strategies

Published September 10, 2023

Carrying Student Loan Debt

If you have a student planning for college, you’re probably aware of the current student loan crisis and the ramifications of student loan debt.

In the past, many families have allowed their student to attend a college that’s financially out of reach by subsidizing the cost with federal student loans, private loans, and parent loans.

But parents and students should be concerned when applying to college and determining the cost. Financial experts and college planning experts agree the ability to pay for college should be a part of the final decision.

But do the costs outweigh the benefits? And how much student loan debt is too much?

Student Loan Debt Statistics

First, let’s look at the statistics. According to data from the U.S. Federal Reserve, Americans are more burdened by student loan debt than by credit card debt. There are 48 million borrowers who owe over $1.76 trillion in student loan debt, compared to $1.03 trillion in total U.S. credit card debt.

Data from the class of 2020 shows 51% of college students took out federal student loans for public institutions, graduating with an average debt of $21,400. Around 53% of students graduating from private nonprofit four-year institutions took out federal loans of around $22,600. What’s more, parents took out $10,402 million in federal Parent PLUS loans to pay for their student’s education in the 2021-2022 school year.

In the last year that the Federal Reserve estimated the average monthly student loan payment (2018), it was between $200 and 299.

Imagine graduating with a low-paying entry-level job and being burdened with college debt that you are unable to repay.

Why Would I Take Out a Student Loan?

It’s simple — college is expensive. Without student loans, many families would be unable to afford the cost of attendance

Student loans were meant to help families decrease the personal financial burden of paying for college while allowing the student to repay them post-graduation after obtaining employment .

Unfortunately, many students borrow too much and aren’t prepared for the strain it puts on an entry-level salary.

Student loans aren’t “bad,” particularly if borrowed wisely and used to supplement other college funds — such as family savings, scholarships, merit aid, and wages earned while working during college.

The key is to borrow only what you need and understand your repayment responsibilities.

How Much Debt Is Unreasonable?

In a Washington Post article about college costs and college debt, a few experts weighed in on how much debt is unreasonable. Several agreed that the rule of thumb for total undergraduate borrowing should be limited to what you might expect to make in your first year after graduation.

Mark Kantrowitz, an expert on student financial aid and student loans explained, “If total debt is less than annual income, you should be able to repay your student loans in 10 years or less.”

Sara Goldrick-Rab, author of Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream and a professor at Temple University, had additional advice. “Debt in an amount that causes the students or the family stress — whether before, during, or after college — is too much debt.”

Andrew B. Palumbo, dean of admissions and financial aid at Worcester Polytechnic Institute, said how much to borrow for college “is an inherently personal decision that is best made after conducting thoughtful research. Students and their parents should know their school’s graduation rate, loan default rate, and the likely return on investment for the major they choose.”

In addition, the amount of debt your student takes on during college should be thoroughly discussed and analyzed before signing on the dotted line. Many college financial aid offices provide loan documents without proper financial counseling.

You and your student must understand the responsibilities and the consequences of borrowing to pay for college.

How Do You Determine Your College ROI?

It’s important to calculate the return on investment (ROI) of your student loans. For example, borrowing $200,000 to pay for a degree that promises a starting salary of $40,000 per year would be a poor return on investment. This would be considered high debt for student loans.

As stated earlier, to make things simple, your amount of student loans should be less than your first year post-graduation salary. But how do you know what your potential salary might be?

The Bureau of Labor Statistics Occupational Outlook Handbook is a great online resource to use. You can look up any career, along with statistics related to its growth potential and projected need, and find the average starting salary for whatever degree your student is pursuing.

If your student is still undecided, look up the salary for different bachelor’s degrees. That should give you a good figure to use when calculating your student’s loan/debt manageability.

You should also consider other debt and maintain a manageable debt-to-income ratio. The student loan payment should be limited to 8-10% of the gross monthly income.

For example, for an average starting salary of $30,000 per year, with expected monthly income of $2,500, the monthly student loan payment using 8% should be no more than $200.

Allocating more than 20% of discretionary income toward student loans can overburden your student and make it impossible to repay their loans in a timely manner.

How Do You Calculate Student Loan Payments?

To calculate your student loan payments, you must first determine how much your student will be borrowing for college along with the interest rates. All students qualify for federal student loans, and you should always consider these before taking out private loans.

Federal loans allow for deferment and forbearance when necessary, whereas the rules for private loan repayment are stricter and the interest rates are higher. These are calculations that might fluctuate over the course of four years, but doing them will help your student stay on track and not borrow more money than they can repay.

There are many loan repayment calculators available. To help parents and students make informed decisions about student loan cost, we developed the Road2College Student Loan Comparison Spreadsheet. We also share how to use it with this simple worksheet and the key factors to consider when comparing student loans.

Parents and students should have a serious discussion about college financing. With every lender, look at the interest rates, repayment terms, and repayment flexibility. Pay attention to the federal loans, especially the ones that are unsubsidized, because the interest will accrue while your student is in college.  

With these loans, it’s wise to pay the interest if it’s affordable.

What Are Some Simple Borrowing Rules to Follow?

After evaluating all the statistics and looking at the student loan data, you might be overwhelmed. If so, here’s a simple checklist to follow:

  • Do your research (look at salaries, career growth patterns, and loan repayment amounts).
  • If necessary, investigate cheaper alternatives (community college, public universities, or work and pay as you go).
  • Don’t borrow more than the first-year salary after graduation and consider debt-to-income ratios.
  • Borrow only what you truly need for educational expenses.

If you follow these simple rules of borrowing, you should be able to keep your student’s college debt manageable. While student loans can help families pay for college, it’s important to remember over borrowing can lead to crushing debt after graduation.

Long-term debt is not only unmanageable, but it will affect your student’s future borrowing potential for major purchases.

Be a wise consumer. Do your homework. Look at the figures. Make wise financial choices.

The Growing Student Loan Crisis

Across the United States and globally, a growing number of students are shouldering an immense financial burden in pursuit of higher education, often hindering their ability to secure a stable financial future.  

The tuition and fees at most higher education institutions have been on a steady uptick, outpacing the rate of inflation. This alarming trend has made it increasingly difficult for families and individuals to afford college without resorting to loans. It’s vital to note that this rise in costs doesn’t only pertain to tuition fees but extends to associated costs such as accommodation, textbooks, and other educational resources, exacerbating the overall financial strain on students.

The mounting student loan debt isn’t just a problem confined to students and their families. It has far-reaching ramifications on the broader economy. High levels of debt mean that young adults are delaying milestones such as buying homes or starting families, consequently dampening economic growth and fostering wealth inequality. Moreover, those grappling with enormous debt are less likely to take entrepreneurial risks, potentially stifling innovation.

Beyond the financial implications, the student loan debt crisis has a profound impact on the mental and emotional well-being of borrowers. The constant worry about debt can lead to increased levels of anxiety and depression. Furthermore, it can strain family relationships and affect career choices, as many feel compelled to pursue high-paying jobs at the expense of their passions or interests.

As the crisis deepens, there is a pressing need for systemic solutions to address the issue of ballooning student loan debt. These might involve reforms in the educational sector, including greater transparency in college pricing, increased availability of financial literacy programs, and the exploration of alternative education financing models, such as income-share agreements.

How Students and Families Can Mitigate Student Loan Debt

Taking on student loan debt is often considered a necessary step in pursuing higher education. However, understanding how to mitigate this debt can save students and their families significant stress and financial strain in the future. Here’s how you can prevent accumulating too much student loan debt:

Explore Scholarships and Grants

Before even considering loans, exhaust all possible options for scholarships and grants, which don’t need to be repaid. Scholarships can be merit-based, need-based, or based on specific criteria like your field of study, community service, or extracurricular activities. Research and apply to as many scholarships and grants as you qualify for to lessen the financial burden.

Choose an Affordable College

Opt for institutions that offer quality education without a hefty price tag. Community colleges, state universities, or online programs often provide a more affordable education compared to private or out-of-state institutions. Conduct a thorough research to find an institution that suits your financial capabilities and educational needs.

Consider Community College

Starting your education at a community college and then transferring to a four-year institution can significantly reduce the overall cost of your degree. Community colleges often offer more affordable tuition rates compared to universities.

Work-Study Programs

Engaging in work-study programs allows you to earn money while studying. This federal program provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.

Limit Borrowing to Necessary Expenses

When taking out loans, borrow only the amount necessary to cover your tuition and basic living expenses. Avoid accumulating debt for lifestyle-related costs, such as luxury housing or frequent dining out.

Federal First

Always opt for federal loans before considering private loans. Federal loans generally have lower interest rates and more flexible repayment options compared to private loans. Additionally, understand the terms and conditions of each loan type to make informed decisions.

Part-Time Employment

Consider working part-time during your studies to supplement your income and reduce the amount you need to borrow. Earning while learning also provides practical experience that can be beneficial in the long run.

Financial Literacy and Planning

Equip yourself with financial literacy skills to manage your debt effectively. Learn how to budget, save, and invest wisely to navigate the financial aspects of your college life seamlessly.

Seek Financial Counseling

Before signing on the dotted line, seek financial counseling to understand the full ramifications of the loans and to develop a strategy for repayment. Many institutions offer financial literacy workshops and resources to aid students in making informed decisions.

Early Repayment

If possible, start repaying your loans while still in school to reduce the overall interest accrued. Even small, regular payments can make a significant difference in the long run.


Use R2C Insights to help find merit aid and schools that fit the criteria most important to your student. You’ll not only save precious time, but your student will avoid the heartache of applying to schools they aren’t likely to get into or can’t afford to attend.  

Other Articles You Might Like:

How to Avoid Student Loans: How Parents Can Help

Are Interest-Free Student Loans Available?

Answers to Your Top 5 Questions about Student Loans




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